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EUR USD Exchange Rate Volatile as Pairing Hovers close to Parity

  • EUR USD Struggling to Sustain Gains – Fed bets support US Dollar.
  • Eurozone PMI’s Impress – May allow Euro to creep higher.
  • US Data May Pressure Euro – Strong Durable Goods Orders may bolster USD.

The EUR USD exchange rate has fluctuated this week as substantial bets of a Fed rate hike continued to pressure the Euro (EUR), but the fall in demand for the US Dollar after the recent Trump jump has prevented the currency pairing from continuing its downtrend from last week.

Fed Rate Hike Bets Pressure Euro US Dollar (EUR USD) Exchange Rate

The Euro’s (EUR) attempts to advance against the US Dollar (USD) have been muted this week as rising bets that the Federal Reserve will raise US interest rates in December have prevented any notable selling of the ‘Greenback’.

The markets reached fever pitch yesterday as the odds of a rate hike later this year were briefly pegged at 100%, thanks to recent growth in the US economy and comments made by Fed Chair Janet Yellen last week that a rate increase was likely to happen ‘relativity soon’.

The Euro was prevented from falling closer to parity as demand for the US Dollar only saw a moderate increase thanks to most investors having already priced in a December rate rise after odds reach over 90% last week.

Euro (EUR) Bolstered by PMI Data

The Euro US Dollar exchange rate began to rally this morning as Markit’s latest Eurozone PMI reports showed a moderate improvement over market forecasts.

The overall Eurozone PMI reports impressed as manufacturing rose from 53.5 to 53.7 in November, beating expectations that it would drop to 53.3. The services data also impressed as it shot past predictions that it would only see a negligible increase from 52.8 to 52.9 to jump to 54.1.

However a disappointing decline in Germany’s manufacturing PMI is likely to hamper the Euro’s potential advances as it dropped from 55 to 54.4, sliding further than an expected drop to 54.8. This stopped the composite PMI from posting a moderate decline, despite a notable rise in the services report from 54.2 to 55.

The slowdown in Europe’s largest economy is likely to weigh on the single currency as investors worry that the lack of growth will increase the chances that the European Central Bank will seek to extend its monetary easing programme past March 2017.

EUR USD Exchange Rate Forecast: Slew of US Data Scheduled for this Afternoon

The EUR USD exchange rate is likely to slide again later today with the release of a number of US ecostats.

The most important of which is the Durable Goods Orders for October, which will likely strengthen the US Dollar as it is forecast to rise from -0.3% to 1.7%, although a surprise decline in orders could weigh heavily on the ‘Greenback’, allowing the Euro to advance.

Any USD gains may be tempered by the release of the latest New Home Sales data, as sales are expected to have dropped from 3.1% to -0.5% in October.

Looking long-term, the US Dollar is likely to push the Euro closer to parity as 2017 approaches as with the Fed’s December hike rate now looking like a sure thing, some investors have begun looking towards possible hikes in 2017, with HSBC predicting up to two rate hikes over the course of the year.

Current Interbank Exchange Rates

At the time of writing the EUR/USD exchange rate was trending around 1.06 and the USD/EUR exchange rate was trending around 0.94.